I've been thinking similar thoughts as to mm's. My theory is that the smart money sees deflation on the horizon. The economy and the mortgage market will suffer. While NRZ is not taking on much direct credit risk they are greatly affected by the likes of Ocwen. NRZ keeps touting that they service loans owed by weaker borrowers with higher LTV. yeah, they won't be prepaying. But will they be able to pay at all in a downturn?
I hold shares but keep reminding myself to not buy more. Can those more familiar with the business explain to me how NRZ doesn't have its earnings cut in half during a mini mortgage meltdown?